A manufacturing alliance between General Motors (GM) and Ford, expected to be unveiled next month, will have the two rival companies developing automatic transmissions designed to improve fuel economy. The alliance could save the companies billions of dollars as they work towards meeting demanding federal fuel economy regulations set for 2017.

GM and Ford have already successfully worked together building six speed automatic front wheel drive transmissions in 2002, introduced in 2006 in approximately thirty different models. Both companies are currently developing 8, 9, and 10 speed transmissions for front and rear wheel drive cars and light trucks and they hope that the agreement will not only speed up technological developments, but will allow them to reduce manufacturing costs.

Packing more gears into the compact transmission housings used in smaller vehicles is an increasingly tricky challenge, according to engineers. Automatic transmissions with more gear ratios and more sophisticated electronic controls are crucial to improving fuel economy but the limited space of compact and subcompact cars makes it difficult. The lack of space is one reason that subcompacts like the Ford Fiesta and Chevrolet Sonic do not achieve higher fuel efficiency than the larger Ford Focus and Chevy Cruze. Longer vehicles also have lower aerodynamic drag, which helps overall efficiency.

Developing transmissions in house will not only allow GM and Ford to tailor the components to suit their needs, but will eliminate royalty costs for licenses and intellectual property rights charged by their current gearbox suppliers. The new transmissions are expected to reach the market by 2015.